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THE EURO ZONE

Keeping everyone happy

This week saw Spain's economy minister Nadia Calviño trying to reassure investors and executives, many of whom are concerned about her Socialist party's power-sharing arrangement with anti-establishment Podemos. In an interview with the Financial Times, she said that the government would consult the business world about proposed labour reforms, which are aimed at undoing those made by former conservative prime minister Mariano Rajoy in 2012, at the height of the crisis. To put it another way: Spain's left-wing government is going to ask companies if they want to change a setup that has, broadly speaking, made life easier and more cost-effective for them over the last few years. One wonders how smoothly the negotiations will go.

Calviño said that it was the government's concern that none of its projected reforms will "endanger job creation", which under Mariano Rajoy progressed at the rate of around two million new positions a year. Yet perhaps job creation - specifically, the status and stability of new contracts - is one of the things that should be under discussion when the government consults industry. The much-vaunted "two-million-a-year" figure of which Rajoy was so proud starts to appear less impressive when one remembers that around a quarter of the country's workforce is on temporary contracts. In fact, Spain has the highest number of temporary workers in the EU and in 2017, around 60% of the contracts they signed were for six months or less.

Such positions are of much more benefit to employers than they are to employees, so Calviño faces a tough task in convincing companies to create more full-time jobs, especially after two substantial raises in the minimum wage in as many years. She will also have to negotiate with the government's employment minister, Communist Party member Yolanda Díaz, who's unlikely to be enthusiastic about the idea of watering-down Podemos' flagship policies, one of which is making pay negotiations industry-wide rather than company-wide. Conflicts of interest, both within the government and between the government and industry, are bound to arise.

The fact that Calviño's government is already slashing its deficit-reduction and GDP-expansion forecasts and increasing public spending by around 3% this year isn't going to help reassure investors. Indeed, the Socialist-Podemos alliance must perform a precarious balancing act to keep everyone happy: concerned parties include the business world, the EU, Podemos, an electorate whose distrust of politicians is at an all-time low and right-wing, separatist and centre-right parties, whose support in congress is crucial for passing legislation. It's hard to imagine a more disparate group, one with priorities ranging from increasing profits to reducing unemployment and social inequality. If there's one skill that's going to be key for members of Pedro Sánchez's new leftist government, it's negotiation.